The 10th Circuit Court of Appeals has upheld a decision of the Office of Chief Administrative Hearing Officer (OCAHO) in Split Rail Fence Company, Inc. v. USA (10th Cir. Dec. 2016). In doing so, it found Split Rail violated the law by retaining 10 employees after having constructive knowledge of their undocumented status.

In 2009, Immigration and Customs Enforcement (ICE) provided a Notice of Inspection (NOI) and a Notice of Suspect Documents (NSD) concerning 32 employees, to Split Rail. The NSD stated the I-9 documentation reviewed by ICE shows certain individuals are not authorized to work in the U.S. and “unless the employees present valid identification and employment eligibility documentation acceptable for completing the Form I-9, other than the documentation previously submitted to you, they are considered by ICE to be unauthorized to work in the United States."

Split Rail videotaped serving the NSD on the 32 employees. At that time, 23 of the 32 employees admitted they were unauthorized to work and Split Rail terminated them. However, nine employees insisted they were authorized to work and Split Rail accepted their verbal statements without requiring new documentation to support these assertions.

Thereafter, Split Rail sought guidance from the Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) on how it should respond to NSD without violating IRCA’s anti-discrimination provision. Although OSC stated it could not provide an advisory opinion, it stated that a NSD “may provide a non-discriminatory reason” to re-verify an employee’s employment eligibility. Despite this guidance, Split Rail declined to request documentation for the nine employees in question. Later, Split Rail asserted their position on re-verification was consistent with OSC’s guidance, which OCAHO and the Court totally disagreed with.

After ICE served Split Rail with a Notice of Intent to Fine (NIF), Split Rail settled the matter. Inexplicably, the settlement only involved substantive paperwork violations, not the continued employment of the nine employees. Apparently, ICE believed Split Rail had terminated all 32 employees.

In June 2011, ICE returned with another NOI. Several months later, ICE issued a new NSD. Since nine of the 10 employees in the NSD were the same as 2009, Split Rail did not take any action because the employees had previously stated they were authorized to work. After ICE issued another NIF, Split Rail’s owner wrote a letter to ICE wherein he stated he “had absolutely no reason to believe... that any of the employees in the 2011 NSD are anything but law abiding residents” of the U.S. He also noted “each appeared authorized to work in the United States because they had bank accounts, houses, and mortgages.” OCAHO and the Court found the owner’s statements were not a substitute for requiring employees in question to provide new documentation to support verification.

The Court found ICE established a prima facie showing of the employee’s unauthorized status with evidence that ICE’s computer search of its records showed employees were suspected to be unauthorized due to false I-9 documentation. Furthermore, evidence of the NSD and the employer’s inaction to re-verify the individual’s work eligibility established prima facie evidence of Split Rail’s constructive knowledge of the employees’ unauthorized status. The Court noted constructive knowledge meant “knowledge which may fairly be inferred through notice of certain facts and circumstances which lead a person, through the exercise of reasonable care, that would indicate that the alien is not authorized to work.” See also 8 C.F.R. § 274a.1.

Split Rail’s defense included testimony from a retired ICE agent that errors may result from USCIS and/or DHS database searches. Additionally, Split Rail relied on the owner’s testimony that the nine employees assured him that they were authorized to work and the employees had bank accounts, homes, mortgages and cars.

Although OCAHO and the Court acknowledged mistakes can be made in NSDs, ICE relied upon computer searches and uncontested investigation reports. Plus, ICE provided an opportunity to employees to present alternative documentation. But, the employees never did so. The Court found Split Rail failed to rebut ICE’s prima facie case. Specifically, Split Rail’s response to the NSD, though its owner’s actions and statements, was inadequate. Thus, the Court agreed Split Rail had constructive knowledge of the employee’s unauthorized status.

Concerning the 10th employee in question, Split Rail accepted a foreign passport with an I-551 stamp authorizing his employment for one year in the completion of the employee’s I-9 form. The Court stated, upon the expiration of the stamp, Split Rail had a duty to reverify the employee’s work status but failed to do so. Split Rail’s argument that the employee was a lawful permanent resident and did not need to re-verified was rejected because the I-551 stamp was only employment authorization for one year. Once Split Rail failed to re-verify the employee after the expiration of his I-551 stamp, the Court found Split Rail was working an unauthorized employee.

This decision is an example of what not to do when an employer receives a NSD. If Split Rail had followed the correct procedure in response to the NSD, it would likely not have penalized over $30,000 for its I-9 violations.

In one of the most interesting recent decisions, the Office of Administrative Hearing Officer (OCAHO) rejected the company’s argument that the I-9 forms in error or missing were the “fruit of the poisonous tree” and should be excluded from the evidence considered. See U.S. v. Frimmel Management, LLC, 12 OCAHO no. 1271c (October 2016).

This case arises out of the notorious Maricopa County, Arizona and Sheriff Joe Arpacio. The Maricopa County Sheriff’s Office (MCSO) conducted a criminal investigation into Frimmel Management alleging it knowingly hired or employed unauthorized workers. A state court dismissed the criminal complaints for a variety of reasons involving misdeeds by the MCSO.

Because of MCSO’s investigation, Frimmel Management’s identity was disclosed to Immigration and Customs Enforcement (ICE), who decided to issue a Notice of Inspection (NOI). Thus, in August 2013, ICE issued a NOI and subpoena on Frimmel Management. The company provided the I-9 forms that it possessed but many employees did not have any I-9 forms and others had I-9 forms fraught with errors.

As a result, ICE filed a Notice of Intent to Fine, a Complaint and Amended Complaint alleging numerous errors. Count I alleged 225 violations for failure to ensure employees properly completed Section 1 and/or the company failed to complete Sections 2 and 3 of employees’ I-9 forms. Count II alleged the same type of violation except all the employees were unauthorized to work. Counts III and IV alleged Frimmel Management failed to prepare and/or present I-9 forms for 63 employees, 29 of which were alleged to be unauthorized.

ICE sought a $935 baseline penalty based upon 84% error rate and aggravated the violations for lack of good faith and the employment of some unauthorized workers.

Frimmel Management argued all of the violations violated their 4th and 5th Amendment rights as the evidence was gathered illegally; thus, asserting the documents were the “fruit of the poisonous tree.” However, OCAHO declined to exclude this evidence because the only information that ICE obtained from the MCSO investigation was the identity of the company. OCAHO cited Supreme Court caselaw that this did not constitute grounds for exclusion as “fruit of the poisonous tree.” OCAHO agreed. OCAHO also stated even assuming ICE’s evidence was the “fruit” of MCSO’s illegal conduct, the evidence was not a “direct result” of MCSO’s conduct. Thus, this argument also failed.

There was very little dispute about the I-9 form errors – Frimmel Management committed numerous substantive paperwork violations, including failure to prepare I-9 forms, failure to ensure the employees checked an appropriate box as to their work authorization – U.S. Citizen, permanent resident, etc., failure to ensure employees signed the attestation, and failure to provide appropriate information in Lists A, B or C.

Thus, ICE determined Frimmel Management committed 380 violations. The company was successful in showing ICE could not establish 38 employees were unauthorized. ICE relied on several documents, including a Notice of Suspect Documents, which were insufficient to prove unauthorized status.

OCAHO did lower the baseline penalty to $900 for most of the violations and $1000 for the ones involving unauthorized workers.; thus, the total penalty was $347,500.

This case demonstrates the need for employers to be aware of their I-9 obligations and to take them seriously. If Frimmell Management had been more careful in the completion of the I-9 forms and had completed I-9 forms on all employees hired, their penalties would have been much lower.

Le Grande Tetons, LLC, a company that owns and operates Twin Peaks, a sports bar/restaurant with two locations in Wichita, Kansas, pleaded guilty in federal court to hiring undocumented workers.

In September 2013, ICE conducted a Form I-9 inspection at the two Twin Peaks Wichita locations and identified more than 20 unauthorized workers. Afterwards, a Twin Peaks manager agreed to immediately fire the employees, but, in fact, rehired many of these employees. Thereafter, federal search warrants were executed at both Twin Peaks locations in July 2014.

As a result of a plea agreement in the case, the court imposed a fine of $50,000 on the company. According to the plea agreement, the U.S. Attorney’s Office agreed not to pursue any additional charges against the owners, current employees or former employees of Le Grande Tetons, with the exception of two former management employees who remain under federal investigation.

This investigation is an example of ICE’s new policy to emphasize criminal investigations of those employees who flaunt the law by not rehiring or discharging undocumented workers.